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TKG - Telkom SA Limited - Vodacom Group - Annual results - March 2008
Vodacom Group annual results - March 2008
HIGHLIGHTS 2008
TOTAL CUSTOMERS INCREASED BY 12.7% TO 34.0 MILLION
CUSTOMERS INCREASED BY 7.9% TO 24.8 MILLION IN SOUTH AFRICA
CUSTOMERS INCREASED BY 29.6% TO 4.2 MILLION IN TANZANIA
CUSTOMERS INCREASED BY 25.0% TO 3.3 MILLION IN THE DEMOCRATIC
REPUBLIC OF CONGO
CUSTOMERS INCREASED BY 41.6% TO 395 THOUSAND IN LESOTHO
CUSTOMERS INCREASED BY 29.8% TO 1.3 MILLION IN MOZAMBIQUE
REVENUE INCREASED BY 17.1% TO R48.2 BILLION
PROFIT FROM OPERATIONS INCREASED BY 15.0% TO R12.5 BILLION
EBITDA INCREASED BY 15.7% TO R16.5 BILLION
NET PROFIT AFTER TAXATION INCREASED BY 21.3% TO R8.0 BILLION
CASH GENERATED FROM OPERATIONS INCREASED BY 17.8% TO R16.3 BILLION
DIVIDENDS DECLARED TO GROUP SHAREHOLDERS INCREASED BY 10.0% TO R5.9 BILLION
COMMENTARY
Vodacom Group (Proprietary) Limited, South Africa`s market leader in the
provision of cellular services announces its results for the year ended
March 31, 2008.
SOUTH AFRICA
Customers
The total number of customers increased by 7.9% to 24.8 million (2007: 23.0
million). The number of prepaid customers has increased by 6.4% to 21.2
million, while the number of contract customers has increased by 17.5% to
3.5 million.
The strong growth in customers was a direct result of the number of gross
connections achieved, with continued levels of handset support to service
providers in respect of the contract base, combined with decreased churn in
the contract base.
Contract gross connections increased by 17.4% to 782 thousand (2007: 666
thousand), and prepaid gross connections increased by 11.1% to 11.2 million
(2007: 10.1 million), bringing the total number of connections for the year
to 12.0 million (2007: 10.9 million).
Loyalty and retention programmes continue to play an integral role in
achieving the strategy of retaining market share and attracting new
customers.
ARPU
During the period under review, total ARPU remained stable at R125 (2007:
R125) per month mainly as a result of the implementation of the
supplementary disconnection rule during September 2007.
Contract customer ARPU has decreased by 6.0% to R486 (2007: R517)
per month. The main contributing factor to this decrease was the rapid
growth in data customers as well as in the low end top up packages.
The developing market segment, through the prepaid service continued to
drive market penetration in 2008 with the prepaid service making up 93.4%
(2007: 93.2%) of all gross connections. The prepaid customer ARPU remained
stable at R62 (2007: R63) per month.
Community services ARPU decreased by 23.6% to R689 (2007: R902) per month
due to increased competition.
Churn
The cost of acquiring contract customers in a highly developed market is
considerable. Vodacom implemented upgrade and retention policies over the
last few years to retain its customers. Through the continued high level of
handset support to service providers and an improvement in service to
customers, contract churn remained low at 8.3% (2007: 9.7%).
The prepaid market is characterised by low acquisition costs due to the
flexibility required by this market to access services. Prepaid churn
increased during the year under review to 47.9% (2007: 37.5%) due to the
supplementary disconnection rule implemented on prepaid customers. This
change increased prepaid churn, but provides a better reflection of active
prepaid SIM cards on the network.
Traffic and minutes of use
Total traffic increased with 11.7% to 22.8 billion (2007: 20.4 billion)
minutes. This growth was due mainly to the 7.9% growth in the total customer
base from 23.0 million to a base of 24.8 million at the end of March 31,
2008. Customer calling patterns continued the trend of the last few years
where total mobile-to-mobile traffic increased with 13.5% while total mobile-
to-fixed and fixed-to-mobile traffic only increased with 3.5%.
Minutes of use is reflective of voice trends outside and in excess of the
bundle and showed a stabilised trend for the year under review. Contract
minutes showed an 8.5% decrease to 172 (2007: 188) minutes per customer per
month for 2008, as a result of high sales in hybrid products at the low end
of the market; prepaid minutes showed a 2.1% decrease to 46 (2007: 47)
minutes per customer per month in 2008.
Estimated market share
Despite strong competition, Vodacom remained the leader in the South African
market with an estimated 55% (2007: 58%) market share as at March 31, 2008.
The decline in market share is a result of increased deletions on the
prepaid customer base and renewed efforts by the existing competitors to
increase their share of the gross connections of both contract and prepaid
customers. The cellular industry in South Africa has grown by an estimated
10% since March 2007. The market penetration of the cellular industry is now
an estimated 94% (2007: 84%) of the population with a total cellular market
of approximately 45 million (2007: 40 million) customers. Prepaid customers
continue to dominate the market and comprise an estimated 83% (2007: 83%) of
the total cellular market.
NON-SOUTH AFRICAN OPERATIONS
Vodacom`s non-South African operations provide world-class communication
services to 9.2 million customers (2007: 7.1 million). Profit from these
operations increased by 51.6% to R790 million.
Vodacom Tanzania achieved a milestone in its customer base. The customer
base increased by 29.6% to 4.2 million (2007: 3.2 million) at March 31,
2008. The Tanzanian market remains highly competitive, but low mobile
penetration, estimated at 20% of the population combined with current
economic growth signals further potential. Vodacom Tanzania`s estimated
market share decreased slightly to 52% (2007: 55%) at March 31, 2008.
Vodacom Congo increased its customer base by 25.0% to 3.3 million (2007: 2.6
million) at March 31, 2008. Vodacom Congo retained its market lead with an
estimated market share of 41% (2007: 47%) at March 31, 2008. The lower
market share is the result of competitors cutting retail prices and offering
various packages to attract new connections. The DRC has the lowest
estimated mobile penetration of all Vodacom`s operations at 12% (2007: 9%)
of the population.
Vodacom Lesotho is a small operation, but its estimated 80% market share at
March 31, 2008 enables it to achieve high levels of profitability. Vodacom
Lesotho increased its customer base by 41.6% to 395 thousand (2007: 279
thousand). Mobile penetration in Lesotho is now estimated at 26% (2006:17%).
Vodacom Mozambique increased its customer base by 29.8% to 1,282 thousand
(2007: 988 thousand) at March 31, 2008. Vodacom Mozambique increased its
estimated market share to 40% (2007: 35%) despite tough economic conditions,
by being the value leader in the market. Mobile penetration is estimated at
16% (2007: 14%).
REVENUE
Geographical split
Rand millions % change
Year ended March 31, 2006 2007 2008 06/07 07/08
South Africa, including
holding companies 31,069 37,007 42,784 19.1 15.6
Tanzania 1,312 1,729 2,354 31.8 36.1
DRC 1,334 1,914 2,297 43.5 20.0
Lesotho 170 227 309 33.5 36.1
Mozambique 158 269 434 70.3 61.3
Revenue 34,043 41,146 48,178 20.9 17.1
Revenue composition
Rand millions
Year ended March 31, 2006 2007 2008
Airtime, connection and access 20,085 23,708 27,095
Data 2,038 3,342 5,002
Interconnection 6,697 7,835 8,887
Equipment sales 3,986 4,699 5,052
International airtime 971 1,306 1,836
Other sales and services 266 256 306
Revenue 34,043 41,146 48,178
Revenue composition
% of total % change
Year ended March 31, 2006 2007 2008 06/07 07/08
Airtime, connection
and access 58.9 57.7 56.2 18.0 14.3
Data 6.0 8.1 10.4 64.0 49.7
Interconnection 19.7 19.0 18.5 17.0 13.4
Equipment sales 11.7 11.4 10.5 17.9 7.5
International airtime 2.9 3.2 3.8 34.5 40.6
Other sales and services 0.8 0.6 0.6 (3.8) 19.5
Revenue 100.0 100.0 100.0 20.9 17.1
Revenue increased by 17.1% for the year to March 31, 2008 boosted by a 49.7%
increase in data revenue. The increase in revenue was mainly driven by a
12.7% increase in the customer base to 34.0 million customers. Prepaid
customers represent 88.8% (2007: 89.4%) of the total customer base.
Data revenue
Geographical split
Rand millions
Year ended March 31, 2006 2007 2008
South Africa 1,886 3,113 4,669
Tanzania 108 146 207
DRC 25 52 79
Lesotho 16 23 31
Mozambique 3 8 16
Data revenue 2,038 3,342 5,002
Data revenue
Geographical split
% of total % change
Year ended March 31, 2006 2007 2008 06/07 07/08
South Africa 92.6 93.1 93.4 65.1 50.0
Tanzania 5.3 4.4 4.1 35.2 41.8
DRC 1.2 1.6 1.6 108.0 51.9
Lesotho 0.8 0.7 0.6 43.8 34.8
Mozambique 0.1 0.2 0.3 166.7 100.0
Data revenue 100.0 100.0 100.0 64.0 49.7
Airtime, connection and access
Vodacom`s airtime, connection and access revenue increased primarily due to
the number of customers increasing by 12.7% to 34.0 million.
Data
Vodacom`s data revenue increased mainly due to higher penetration levels,
but also due to more affordable product offerings. Vodacom South Africa
transmitted 4.7 billion (2007: 4.5 billion) SMSs over its network during the
year ended March 31, 2008. The number of active data users includes: MMS
users 1.4 million (2007: 1.2 million); data card and USB modem users 370
thousand (2007: 149 thousand); 3G/HSDPA handsets 1.3 million (2007: 584
thousand); Vodafone live! users 1,421 thousand (2007: 899 thousand); unique
Mobile TV users 31 thousand (2007: 33 thousand).
Data revenue now constitutes 11.9% (2007: 9.4%) of service revenue (service
revenue excludes equipment sales, starter pack sales and non-recurring
revenue). Data revenue in all countries increased substantially, reaffirming
the increased consumer connectivity needs.
Interconnection
Vodacom`s interconnection revenue increased by 13.4%, predominantly due to
the growth in the customer base and the related increase in airtime traffic.
Equipment sales
In South Africa, handset sale volumes increased by 10.9% to 5.1 million
(2007: 4.6 million) units. The growth in equipment unit sales was mainly
driven by growth in customer bases, phone upgrades by customers and lower
overall prices of new handsets due to more suppliers focusing on more
affordable handsets. The average price per handset sold was R1,052 compared
to R1,067 in the previous financial year.
International airtime
International airtime revenue of R1.8 billion, which increased by 40.6% year
on year, comprises international calls by Vodacom customers, roaming revenue
from Vodacom`s customers making and receiving calls whilst abroad and
revenue from international visitors roaming on Vodacom`s networks.
Other sales and services
Revenue from other sales and services includes revenue from Vodacom`s cell
captive insurance vehicle, wireless application service provider ("WASP")
revenue, site sharing rental income as well as other revenue from non-core
operations.
PROFIT FROM OPERATIONS
Geographical split
Rand millions % change
Year ended March 31, 2006 2007 2008 06/07 07/08
South Africa 8,602 10,293 11,669 19.7 13.4
Tanzania 263 346 460 31.6 32.9
DRC 117 277 364 136.8 31.4
Lesotho 51 75 123 47.1 64.0
Mozambique (144) (177) (157) (22.9) 11.3
Holding companies (23) 46 32 >200.0 (30.4)
Profit from operations 8,866 10,860 12,491 22.5 15.0
Profit from operations
margin (%) 26.0 26.4 25.9 0.4 (0.5)
Profit from operations for the Group increased by 15.0% to R12.5 billion,
based on revenue growth of 17.1% which was offset by cost increases in all
operations in a rising inflationary environment and the start up costs of
Vodacom Business. Operating expenses increased by 17.8% compared to revenue
growth of 17.1%, resulting in Vodacom`s profit from operations margin
decreasing to 25.9% (2007: 26.4%).
The Mozambique loss from operations includes an impairment of assets of
R29.9 million (2007: R22.9 million).
EBITDA
Geographical split
Rand millions % change
Year ended March 31, 2006 2007 2008 06/07 07/08
South Africa 11,053 12,963 14,790 17.3 14.1
Tanzania 465 584 765 25.6 31.0
DRC 373 603 745 61.7 23.5
Lesotho 67 97 139 44.8 43.3
Mozambique (129) (69) (32) 46.5 53.6
Holding companies (20) 49 56 >200.0 14.3
EBITDA 11,809 14,227 16,463 20.5 15.7
EBITDA margin (%) 34.7 34.6 34.2 (0.1) (0.4)
EBITDA margin excluding
equipment sales (%) 39.9 39.9 39.3 - (0.6)
Vodacom`s EBITDA margin adjusted for the impact of low margin cellular phone
and equipment sales at 39.3% was 0.6% lower than the previous year at 39.9%.
OPERATING EXPENSES
Operating expenses composition
Rand millions % change
Year ended March 31, 2006 2007 2008 06/07 07/08
Depreciation, amortisation
and impairment 2,943 3,384 3,941 15.0 16.5
Payments to other network
Operators 4,634 5,636 6,557 21.6 16.3
Other direct network
operating costs 13,663 16,804 19,743 23.0 17.5
Staff expenses 2,042 2,373 2,976 16.2 25.4
Marketing and advertising 977 1,146 1,264 17.3 10.3
Other operating expenditure 1,043 1,064 1,362 2.0 28.0
Other operating income (125) (120) (156) 4.0 (30.0)
Operating expenses 25,177 30,287 35,687 20.3 17.8
Operating expenses as a
% of revenue (%) 74.0 73.6 74.1 (0.4) 0.5
Depreciation, amortisation and impairment
The depreciation expense is largely driven by capital expenditure on
upgrading and expanding the Group`s networks. Capital expenditure on network
equipment has increased in recent years with the implementation and
expansion of 3G/HSDPA networks, but also through coverage strategies
followed in the international operations.
The implementation of IAS 16: Property, Plant and Equipment, during the 2006
financial year, contributed to a lower depreciation charge for that year.
Depreciation and amortisation increased by 16.5% (2007: 15.0%) to R3,941
million for the current financial year. Mozambique`s asset impairment
amounted to R29.9 million (2007: R22.9 million).
Payments to other network operators
Payments to other network operators increased as a result of an increased
amount of outgoing traffic terminating on other cellular networks, rather
than on fixed-line networks. As the cost of terminating calls on other
cellular networks is materially higher than calls terminating on fixed-line
networks and as mobile substitution increases with the growing number of
total mobile users in South Africa, interconnection charges will continue
increasing, putting pressure on margins.
Other direct network operating costs
Other direct network operating costs include the cost to connect customers
onto the network as well as expenses such as cost of equipment and
accessories sold, commissions paid to the distribution channels, customer
retention expenses, regulatory and licence fees, distribution expenses,
transmission rental costs as well as site and maintenance costs.
Staff expenses
Staff expenses increased primarily as a result of an increase in permanent
headcount of 5.5% to 6,247 (2007: 5,920) employees in 2008. The headcount
increase is mainly the result of the expansion of customer care operations,
the strengthening of senior management structures to support the growth in
ongoing operations and the launch of Vodacom Business. Annual salary
increases and increased provisions for long-term incentive schemes also
contributed to the increase in staff expenses.
Employee productivity has improved in all of Vodacom`s operations, as
measured by customers per employee, improving with 6.9% to 5,442 (2007:
5,093) customers per employee.
Marketing and advertising
Marketing and advertising expenses are mainly driven by advertising related
to new technology products and enhancing brand presence in all operations.
Other operating expenditure
The increase in other operating expenditure was primarily due to
inflationary factors and the growth in the business. Other operating
expenditure comprise of expenses such as accommodation, information
technology costs, office administration, consultant expenses, social
economic investment and insurance.
Other operating income
Other operating income comprises income that Vodacom does not consider as
part of its core activities such as cost recoveries for risk management and
consultancy services, franchise fees and rent received.
INTEREST, DIVIDENDS AND OTHER FINANCIAL INCOME AND FINANCE COSTS
Net gains/(losses) on financial instruments analysed by category, is as
follows:
Rand millions % change
Year ended March 31, 2006 2007 2008 06/07 07/08
Finance income 130 75 72 (42.3) (4.0)
Finance expenses (246) (369) (681) (50.0) (84.6)
Gain/(loss) on foreign
Exchange forward contract
Revaluation (261) 468 346 >200.0 (26.1)
Loss on revaluation of
foreign denominated
liabilities (225) (642) (162) (185.3) 74.8
(Loss)/gain on
revaluation of foreign
denominated assets (27) 10 (15) 137.0 (>200.0)
Loss on interest rate swap
Revaluation (7) (10) (10) (42.9) -
Gain/(loss) on sale of
Investments (3) (1) 2 66.7 >200.0
Gain on revaluation of
foreign denominated cash
and cash equivalents - 6 24 - >200.0
Total net losses on
financial instruments (639) (463) (424) 27.5 8.4
Remeasurement of foreign exchange contracts ("FECs"), asset and liability
revaluations, interest rate swaps, cash and cash equivalents, and a
gain/loss on sale of investments resulted in a net gain of R185.1 million
(2007: losses of R169.1 million).
In terms of a shareholders agreement, the minority shareholder in Vodacom
Congo (RDC) s.p.r.l., Congolese Wireless Network s.p.r.l. ("CWN") has a put
option which comes into effect three years after the commencement date,
December 1, 2001, and for a maximum of five years thereafter. In terms of
the option, CWN shall be entitled to put to Vodacom International Limited
such number of shares in and claims on loan account against Vodacom Congo
(RDC) s.p.r.l. as constitute 19% of the entire issued share capital of that
company. CWN can exercise this option in a maximum of three tranches and
each tranche must consist of at least 5% of the entire issued share capital
of Vodacom Congo (RDC) s.p.r.l. The option price will be the fair market
value of the related shares at the date the put option is exercised. The put
option has a nil value as at March 31, 2008 and 2007. The option liability
had a value of R396.5 million (2007: R249.3 million) as at March 31, 2008.
Finance costs increased by 84.6% to R681.3 million mainly due to higher bank
overdraft levels utilised to fund working capital. The net debt to equity
ratio increased to 93.1% (2007: 72.8%) at March 31, 2008.
TAXATION
The taxation expense increased by 7.1% to R4.1 billion (2007: R3.8 billion)
for the year ended March 31, 2008, mainly due to higher South African normal
taxation paid on higher profits. Vodacom`s effective tax rate however
decreased to 34.1% (2007: 36.9%) primarily due to a decrease in the
secondary taxation on companies ("STC") liability incurred as a result of
the reduction in the STC rate from 12.5% to 10.0% effective October 1, 2007.
GROUP SHAREHOLDER DISTRIBUTIONS
Dividends declared for the 2008 financial year totalled R5,940.0 million
(2007: R5,400.0 million), an increase of 10.0%. The final dividend of
R3,190.0 million was paid on April 3, 2008.
CAPITAL EXPENDITURE
Capital expenditure additions
Geographical split
Rand millions
Year ended March 31, 2006 2007 2008
South Africa 4,384 4,993 4,252
Tanzania 318 957 713
DRC 273 506 658
Lesotho 26 25 36
Mozambique 121 85 111
Holding companies 16 182 146
Capital expenditure for the year 5,138 6,748 5.916
Capital expenditure additions (including
software) as a % of revenue (%) 15.1 16.4 12.3
CAPITAL EXPENDITURE
Capital expenditure additions
Geographical split
% of total % change
Year ended March 31, 2006 2007 2008 06/07 07/08
South Africa 85.3 73.9 71.8 13.9 (14.8)
Tanzania 6.2 14.2 12.1 >200.0 (25.5)
DRC 5.3 7.5 11.1 85.3 30.0
Lesotho 0.5 0.4 0.6 (3.8) 44.0
Mozambique 2.4 1.3 1.9 (29.8) 30.6
Holding companies 0.3 2.7 2.5 >200.0 (19.8)
Capital expenditure
for the year 100.0 100.0 100.0 31.3 (12.3)
Capital expenditure
additions (including
software) as a % of
revenue (%) - - - 1.3 (4.1)
The Group`s investment in infrastructure amounted to R5.9 billion (2007:
R6.7 billion) of which R4.9 billion (2007: R6.1 billion) relates to
property, plant and equipment and R1.0 billion (2007: R0.6 billion) to
computer software.
Closing capital expenditure investment at cost
Geographical split
2007 2008
Year ended March 31, R billions Foreign R billions Foreign
South Africa (R billions) 27.3 - 31.2 -
Tanzania (TSH billions) 2.7 456.7 3.8 579.1
DRC (US$ millions) 2.9 391.3 3.9 483.4
Lesotho (Maloti millions) 0.2 184.1 0.2 219.6
Mozambique (MT millions) 0.8 2,961.2 1.1 3,358.0
Holding companies (R billions) 0.2 - 0.1 -
Closing capital expenditure
investment at cost 34.1 - 40.3 -
Property, plant and equipment (including software) that was sold and
scrapped, amounted to R706.2 million (2007: R1,956.9 million).
Foreign currency translation differences for 2008 increased cumulative
capital expenditure by R1,042.1 million (2007: R793.0 million).
It is Vodacom`s policy to hedge foreign denominated commitments of South
African operations above a certain minimum level. However, Vodacom does not
qualify for hedge accounting in terms of IAS 39 and therefore, all capital
expenditure in South Africa is recorded at the exchange rate ruling at the
date of acceptance of the equipment. Capital expenditure of Vodacom`s non-
South African operations is translated at the average exchange rate of the
Rand against the operation`s reporting currency for the period, while
closing capital expenditure is translated at the closing exchange rate of
the Rand against the reporting currency. For this reason, Vodacom`s capital
expenditure in any given year cannot be properly evaluated without taking
the exchange rate movements against the Rand into account, which are shown
under the section "Financial instruments and risk management".
FINANCIAL STRUCTURE AND FUNDING
Vodacom`s net debt position increased to R5.2 billion (2007: R2.7 billion)
as at March 31, 2008. The Group`s net debt to EBITDA ratio was 52.6% (2007:
42.4%) while Vodacom`s net debt to equity ratio increased to 93.1% (2007:
72.8%).
Debt includes the final dividend of R3.2 billion (2007: R2.9 billion)
payable to the Group`s shareholders and the STC thereon, due to these
dividends being paid very soon after year-end and the materiality thereof.
In addition, in terms of covenant calculations, certain intangible assets as
well as minority interest are excluded from equity.
Funding sources
Vodacom`s ongoing objective is to fund all its non-South African operations
by means of project finance, structured such that there is no recourse to
our South African operations. Strong South African cash flows would then be
utilised principally to pay dividends and make new growth-enhancing
investments. The Group utilises its own funds and supported funding
structures, subject to South African Reserve Bank approval to fund offshore
investments in the initial stages of the investment, until the project is
able to support project funding. Non-recourse funding for non-South African
operations is not always suitable to high customer growth environments that
require substantial capital expenditure.
While Vodacom Tanzania repaid its project funding on March 31, 2008, Vodacom
Congo and Vodacom Mozambique are still substantially dependent on funding
and guarantees from South Africa. These operations are funded by a mix of
market priced direct loans as well as security to facilitate their own
credit lines.
In South Africa, debt consists primarily of finance lease liabilities, a
long-term funding loan and short- term money market borrowings at variable
interest rates.
Financial instruments and risk management
Subject to central bank regulations in the various countries as well as
local market condition restrictions, Vodacom manages foreign currency risk,
interest rate risk, credit risk and liquidity risk on an ongoing basis. The
Group`s risk management procedures are described fully in the Group`s Annual
Financial Statements.
Foreign exchange rates
Rand exchange rate % change
Year ended March 31, 2006 2007 2008 06/07 07/08
US Dollar
Average 6.40 7.05 7.11 10.2 0.9
Closing 6.19 7.29 8.13 17.8 11.5
Tanzanian Shilling
Average 180.72 182.02 171.95 0.7 (5.5)
Closing 198.03 170.83 151.99 (13.7) (11.0)
Mozambican Metical
Average 3.89 3.73 3.57 (4.1) (4.3)
Closing 4.37 3.63 2.99 (16.9) (17.6)
CASH FLOW
Vodacom had a positive free cash flow before shareholder distributions and
financing activities of R3.4 billion (2007: R3.7 billion), a decrease of
8.0% when compared to the previous year due to investments in Smart
companies amounting to R956.5 million. The cash generated from operations of
R16.3 billion had a positive variance of R2.5 billion (2007: positive
variance of R2.8 billion) compared to the previous year.
CONCLUSION
As the Vodacom Group embraces the opportunities of a new era of electronic
communications, we face exciting yet challenging times. We will nurture and
grow our traditional mobile telephony business in five countries of
operation while entering the wider world of providing convergence
infrastructure and services.
Oyama Mabandla
Non-executive Chairman
Alan Knott-Craig
Chief Executive Officer
SEGMENT KEY OPERATIONAL INDICATORS
VODACOM SOUTH AFRICA
Year ended March 31, % change
KEY INDICATORS 2006 2007 2008 06/07 07/08
Customers
(thousands) 1 19,162 23,004 24,821 20.1 7.9
Contract 2,362 3,013 3,541 27.6 17.5
Prepaid 16,770 19,896 21,177 18.6 6.4
Community services 30 95 103 >200.0 8.4
Gross connections
(thousands) 9,140 10,859 12,040 18.8 10.9
Contract 506 666 782 31.6 17.4
Prepaid 8,618 10,124 11,248 17.5 11.1
Community services 16 69 10 >200.0 (85.5)
Inactives (3 months - %) 8.7 10.7 10.3 2.0 pts (0.4 pts)
Contract 2.4 3.1 4.0 0.7 pts 0.9 pts
Prepaid 9.6 11.8 11.4 2.2 pts (0.4 pts)
Churn (%) 2 17.7 33.8 42.3 16.1 pts 8.5 pts
Contract 10.0 9.7 8.3 (0.3 pts) (1.4 pts)
Prepaid 18.8 37.5 47.9 18.7 pts 10.4 pts
Traffic (millions of
minutes) 3 17,066 20,383 22,769 19.4 11.7
Outgoing 11,354 13,638 15,323 20.1 12.4
Incoming 5,712 6,745 7,446 18.1 10.4
ARPU (Rand per
month) 4 139 125 125 (10.1) -
Contract 572 517 486 (9.6) (6.0)
Prepaid 69 63 62 (8.7) (1.6)
Community services 1,796 902 689 (49.8) (23.6)
Minutes of use per
month 5 74 69 66 (6.8) (4.3)
Contract 206 188 172 (8.7) (8.5)
Prepaid 49 47 46 (4.1) (2.1)
Community services 2,327 1,151 883 (50.5) (23.3)
Gross capex spend
(Rand millions) 6 4,384 4,993 4,251 13.9 (14.9)
Capex as a % of
revenue (%) 14.1 13.5 9.9 (0.6 pts) (3.6 pts)
Cumulative capex
(Rand millions) 6 24,095 27,310 30,742 13.3 12.6
Capex per customer
(Rand) 1,257 1,187 1,239 (5.6) 4.4
Number of employees 4,148 4,388 4,504 5.8 2.6
Customers per employee 4,619 5,242 5,511 13.5 5.1
Estimated mobile
penetration (%) 7 71 84 94 13 pts 10 pts
Estimated mobile
market share (%) 7 58 58 55 - (3.0 pts)
Notes
1. Customer totals are based on the total number of customers registered on
Vodacom`s network, which have not been disconnected, including inactive
customers, as at the end of the period indicated.
2. Churn is calculated by dividing the average monthly number of
disconnections during the period by the average monthly total reported
customer base during the period.
3. Traffic comprises total traffic registered on Vodacom`s network,
including bundled minutes, outgoing international roaming calls and calls to
free services, but excluding national roaming and incoming international
roaming calls.
4. ARPU is calculated by dividing the average monthly revenue during the
period by the average monthly total reported customer base during the
period. ARPU excludes revenue from equipment sales, other sales and services
and revenue from national and international users roaming on Vodacom`s
networks.
5. Minutes of use per month is calculated by dividing the average monthly
minutes during the period by the average monthly total reported customer
base during the period. Minutes of use exclude calls to free services,
bundled minutes and data minutes.
6. Cumulative capital expenditure ("capex") includes software.
7. Estimated mobile penetration and market share is calculated based on
Vodacom`s total reported customers and the estimated total reported
customers of MTN and Cell C.
VODACOM TANZANIA
Year ended March 31, % change
KEY INDICATORS 2006 2007 2008 06/07 07/08
Customers
(thousands) 1 2,091 3,247 4,207 55.3 29.6
Contract 7 14 16 100.0 14.3
Prepaid 2,081 3,223 4,181 54.9 29.7
Community services 3 10 10 >200.0 -
Gross connections
(thousands) 1,353 2,092 2,645 54.6 26.4
Churn (%) 28.5 35.6 45.5 7.1 pts 9.9 pts
ARPU (Rand) 2 67 52 49 (22.4) (5.8)
Gross capex spend
(Rand millions) 318 957 713 >200.0 (25.5)
Capex as a % of
revenue (%) 24.3 55.3 30.3 31.0 pts (25.0 pts)
Cumulative capex
(Rand millions) 1,503 2,674 3,810 77.9 42.5
Number of employees 3 438 527 618 20.3 17.3
Customers per employee 4,774 6,161 6,807 29.1 10.5
Estimated mobile
penetration (%) 4 9 16 20 7 pts 4 pts
Estimated mobile
market share (%) 4 58 55 52 (3 pts) (3 pts)
Notes
1. Customer totals are based on the total number of customers registered on
Vodacom`s network, which have not been disconnected, including inactive
customers, as at the end of the period indicated.
2. ARPU is calculated by dividing the average monthly revenue during the
period by the average monthly total reported customer base during the
period. ARPU excludes revenue from equipment sales, other sales and services
and revenue from national and international users roaming on Vodacom`s
networks.
3. Headcount includes secondees.
4. Estimated mobile penetration and market share is calculated based on
Vodacom estimates.
VODACOM CONGO
Year ended March 31, % change
KEY INDICATORS 2006 2007 2008 06/07 07/08
Customers
(thousands) 1 1,571 2,632 3,289 67.5 25.0
Contract 14 17 21 21.4 23.5
Prepaid 1,538 2,587 3,209 68.2 24.0
Community services 19 28 59 47.4 110.7
Gross connections
(thousands) 892 1,688 2,141 89.2 26.8
Churn (%) 28.1 30.4 48.0 2.3 pts 17.6 pts
ARPU (Rand) 2 86 77 59 (10.5) (23.4)
Gross capex spend
(Rand millions) 273 506 658 85.3 30.0
Capex as a % of
revenue (%) 20.5 26.4 28.7 5.9 pts 2.3 pts
Cumulative capex
(Rand millions) 2,000 2,852 3,928 42.6 37.7
Number of employees 3 479 627 691 30.9 10.2
Customers per employee 3,279 4,198 4,759 28.0 13.4
Estimated mobile
penetration (%) 4 6 9 12 3 pts 3 pts
Estimated mobile
market share (%) 4 48 47 41 (1 pt) (6 pts)
Notes
1. Customer totals are based on the total number of customers registered on
Vodacom`s network, which have not been disconnected, including inactive
customers, as at the end of the period indicated.
2. ARPU is calculated by dividing the average monthly revenue during the
period by the average monthly total reported customer base during the
period. ARPU excludes revenue from equipment sales, other sales and services
and revenue from national and international users roaming on Vodacom`s
networks.
3. Headcount includes secondees.
4. Estimated mobile penetration and market share is calculated based on
Vodacom estimates.
VODACOM LESOTHO
Year ended March 31, % change
KEY INDICATORS 2006 2007 2008 06/07 07/08
Customers
(thousands) 1 206 279 395 35.4 41.6
Contract 3 3 4 - 33.3
Prepaid 200 272 383 36.0 40.8
Community services 3 4 8 33.3 100.0
Gross connections
(thousands) 98 119 176 21.4 47.9
Churn (%) 22.3 19.0 17.8 (3.3 pts) (1.2 pts)
ARPU (Rand) 2 78 75 73 (3.8) (2.7)
Gross capex spend
(Rand millions) 26 25 36 (3.8) 44.0
Capex as a % of
revenue (%) 15.2 11.0 11.6 (4.2 pts) 0.6 pts
Cumulative capex
(Rand millions) 225 184 220 (18.2) 19.6
Number of employees 3 67 60 70 (10.4) 16.7
Customers per employee 3,071 4,644 5,642 51.2 21.5
Estimated mobile
penetration (%) 4 13 17 26 4 pts 9 pts
Estimated mobile
market share (%) 4 80 80 80 - -
Notes
1. Customer totals are based on the total number of customers registered on
Vodacom`s network, which have not been disconnected, including inactive
customers, as at the end of the period indicated.
2. ARPU is calculated by dividing the average monthly revenue during the
period by the average monthly total reported customer base during the
period. ARPU excludes revenue from equipment sales, other sales and services
and revenue from national and international users roaming on Vodacom`s
networks.
3. Headcount includes secondees.
4. Estimated mobile penetration and market share is calculated based on
Vodacom estimates.
VODACOM MOZAMBIQUE
Year ended March 31, % change
KEY INDICATORS 2006 2007 2008 06/07 07/08
Customers
(thousands) 1 490 988 1,282 101.6 29.8
Contract 8 15 21 87.5 40
Prepaid 482 973 1,250 101.9 28.5
Community services - - 11 n/a n/a
Gross connections
(thousands) 342 797 951 133.0 19.3
Churn (%) 32.2 41.7 58.7 9.5 pts 17.0 pts
ARPU (Rand) 2 36 28 29 (22.2) 3.6
Gross capex spend
(Rand millions) 121 85 111 (29.8) 30.6
Capex as a % of
revenue (%) 76.8 31.7 25.7 (45.1 pts) (6.0 pts)
Cumulative capex
(Rand millions) 605 816 1,123 34.9 37.6
Number of employees 3 170 129 157 (24.1) 21.7
Customers per
employee 2,885 7,659 8,168 165.5 6.6
Estimated mobile
penetration (%) 4 8 14 16 6 pts 2 pts
Estimated mobile
market share (%) 4 30 35 40 5 pts 5 pts
Notes
1. Customer totals are based on the total number of customers registered on
Vodacom`s network, which have not been disconnected, including inactive
customers, as at the end of the period indicated.
2. ARPU is calculated by dividing the average monthly revenue during the
period by the average monthly total reported customer base during the
period. ARPU excludes revenue from equipment sales, other sales and services
and revenue from national and international users roaming on Vodacom`s
networks.
3. Headcount includes secondees.
4. Estimated mobile penetration and market share is calculated based on
Vodacom estimates.
CONSOLIDATED INCOME STATEMENTS
for the three years ended March 31, 2008
2006 2007 2008
Rm Rm Rm
Revenue 34,042.5 41,146.4 48,177.8
Other operating income 125.1 119.8 155.6
Direct network operating cost (18,297.2) (22,439.8) (26,299.5)
Depreciation (2,651.6) (2,901.8) (3,366.0)
Staff expenses (2,042.1) (2,372.5) (2,975.4)
Marketing and advertising
expenses (976.9) (1,146.4) (1,264.3)
Other operating expenses (1,042.7) (1,063.6) (1,362.4)
Amortisation of intangible assets (344.2) (459.4) (545.2)
Impairment of assets 52.8 (22.9) (29.9)
Profit from operations 8,865.7 10,859.8 12,490.7
Finance income 129.9 74.5 72.3
Finance costs (246.0) (369.3) (681.3)
Gains/(Losses) on remeasurement
and disposal of financial
instruments (523.1) (169.0) 185.1
Profit before taxation 8,226.5 10,396.0 12,066.8
Taxation (3,083.7) (3,836.0) (4,109.2)
Net profit 5,142.8 6,560.0 7,957.6
Attributable to:
Equity shareholders 5,026.1 6,342.4 7,811.4
Minority interests 116.7 217.6 146.2
2006 2007 2008
R R R
Basic and diluted earnings
per share 502,610 634,240 781,140
Dividend per share 450,000 540,000 594,000
CONSOLIDATED BALANCE SHEETS
as at March 31, 2008
2006 2007 2008
Rm Rm Rm
ASSETS
Non-current assets 16,079.2 20,844.3 24,468.3
Property, plant and equipment 13,386.6 17,073.2 19,119.6
Intangible assets 1,954.9 2,700.3 4,224.1
Financial assets 92.1 209.5 244.2
Deferred taxation 297.6 386.1 455.1
Deferred cost 311.2 396.4 333.3
Lease assets 36.8 78.8 92.0
Current assets 8,688.6 7,625.9 9,706.9
Deferred cost 451.8 574.8 705.9
Financial assets 149.3 207.5 444.9
Inventory 454.3 364.3 636.9
Trade and other receivables 4,474.0 5,675.0 6,801.1
Lease assets 13.1 32.9 140.5
Cash and cash equivalents 3,146.1 771.4 977.6
Total assets 24,767.8 28,470.2 34,175.2
EQUITY AND LIABILITIES
Ordinary share capital * * *
Retained earnings 8,583.0 9,523.2 11,392.9
Non-distributable reserves (194.0) (97.4) 8.8
Equity attributable to equity
holders of the parent 8,389.0 9,425.8 11,401.7
Minority interests 283.3 221.2 403.6
Total equity 8,672.3 9,647.0 11,805.3
Non-current liabilities 2,236.6 3,812.1 4,788.2
Interest bearing debt 819.2 2,051.4 3,025.8
Non-interest bearing debt - 3.0 6.0
Deferred taxation 602.3 757.3 776.5
Deferred revenue 320.3 412.3 358.8
Provisions 372.3 377.5 373.7
Other non-current liabilities 122.5 210.6 247.4
Current liabilities 13,858.9 15,011.1 17,581.7
Trade and other payables 5,104.7 6,874.4 7,561.3
Deferred revenue 1,604.5 1,904.8 2,229.9
Taxation payable 630.2 1,112.7 580.5
Non-interest bearing debt 4.3 - -
Interest bearing debt 1,645.5 501.0 502.9
Provisions 623.0 741.8 909.5
Dividends payable 2,800.0 2,990.0 3,190.0
Derivative financial liabilities 60.9 7.2 10.8
Bank borrowings 1,385.8 879.2 2,596.8
Total equity and liabilities 24,767.8 28,470.2 34,175.2
* Share capital R100
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
for the three years ended March 31, 2008
Attributable to equity shareholders
Share Retained Non- Total
Capital earnings distributable
Reserves
Rm Rm Rm Rm
Balance at March 31, 2005 * 8,059.1 (299.9) 7,759.2
Net profit for the period - 5,026.1 - 5,026.1
Dividends declared - (4,500.0) - (4,500.0)
Business combinations and
other acquisitions - - - -
Minority shares of VM,
S.A.R.L. - - - -
Contingency reserve - (2.2) 2.2 -
Net gains and losses
not recognised in the
income statement
Foreign currency
translation reserve - - 103.9 103.9
Revaluation of available-
for-sale investments - - (0.2) (0.2)
Balance at March 31, 2006 * 8,583.0 (194.0) 8,389.0
Net profit for the period - 6,342.4 - 6,342.4
Dividends declared - (5,400.0) - (5,400.0)
Business combinations and
other acquisitions - - - -
Contingency reserve - (2.2) 2.2 -
Net gains and losses
not recognised in the
income statement
Foreign currency
translation reserve - - 94.4 94.4
Balance at March 31, 2007 * 9,523.2 (97.4) 9,425.8
Net profit for the period - 7,811.4 - 7,811.4
Dividends declared - (5,940.0) - (5,940.0)
Business combinations and
other acquisitions - - - -
Disposal of subsidiaries - - - -
Minority shares of VM,
S.A.R.L. - - - -
Contingency reserve - (1.7) 1.7 -
Net gains and losses
not recognised in the
income statement
Foreign currency
translation reserve - - 87.7 87.7
Revaluation of available-
for-sale investment - - 16.8 16.8
Balance at March 31, 2008 * 11,392.9 8.8 11,401.7
* Share capital R100
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
for the three years ended March 31, 2008
Minority Total
interests equity
Rm Rm
Balance at March 31, 2005 128.7 7,887.9
Net profit for the period 116.7 5,142.8
Dividends declared (0.9) (4,500.9)
Business combinations and
other acquisitions 46.5 46.5
Minority shares of VM, S.A.R.L. 8.0 8.0
Contingency reserve - -
Net gains and losses not
recognised in the income statement
Foreign currency translation reserve (15.6) 88.3
Revaluation of available-for-sale
investments (0.1) (0.3)
Balance at March 31, 2006 283.3 8,672.3
Net profit for the period 217.6 6,560.0
Dividends declared (170.8) (5,570.8)
Business combinations and
other acquisitions (136.4) (136.4)
Contingency reserve - -
Net gains and losses not
recognised in the income statement
Foreign currency translation reserve 27.5 121.9
Balance at March 31, 2007 221.2 9,647.0
Net profit for the period 146.2 7,957.6
Dividends declared (0.6) (5,940.6)
Business combinations and
other acquisitions (6.1) (6.1)
Disposal of subsidiaries (0.3) (0.3)
Minority shares of VM, S.A.R.L. 0.8 0.8
Contingency reserve - -
Net gains and losses not
recognised in the income statement
Foreign currency translation reserve 42.4 130.1
Revaluation of available-for-sale
investments - 16.8
Balance at March 31, 2008 403.6 11,805.3
CONSOLIDATED CASH FLOW STATEMENTS
for the three years ended March 31, 2008
2006 2007 2008
Rm Rm Rm
CASH FLOW FROM OPERATING ACTIVITIES
Cash receipts from customers 33,132.7 40,380.0 47,409.6
Cash paid to suppliers and
employees (22,042.4) (26,513.9) (31,076.1)
Cash generated from
operations 11,090.3 13,866.1 16,333.5
Finance costs paid (214.3) (326.6) (669.6)
Finance income received 124.1 41.7 74.3
Realised net losses on
remeasurement and disposal
of financial instruments (17.6) (38.8) (151.0)
Taxation paid (2,980.3) (3,303.3) (4,721.5)
Dividends paid - equity
shareholders (3,500.0) (5,300.0) (5,650.0)
Dividends paid - minority
shareholders (0.9) (80.8) (90.6)
Net cash flows from operating
activities 4,501.3 4,858.3 5,125.1
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property, plant
and equipment and intangible
assets (4,788.4) (5,955.3) (6,540.6)
Proceeds on disposal of
property, plant and equipment
and intangible assets 31.2 98.3 10.2
Business combinations and other
acquisitions (0.1) (591.2) (956.5)
Disposal of subsidiaries - - 15.7
Other investing activities (33.5) (135.7) (31.0)
Net cash flows utilised in
investing activities (4,790.8) (6,583.9) (7,502.2)
CASH FLOW FROM FINANCING ACTIVITIES
Non-interest bearing debt
incurred - 3.0 -
Non-interest bearing debt repaid - - (3.0)
Interest bearing debt incurred 32.3 6.0 1,000.0
Interest bearing debt repaid (89.7) (141.3) (117.5)
Finance lease capital repaid (50.2) (67.7) (108.9)
Bank borrowings - - 2,456.0
Share capital and premium
movement of minority shareholders - - 7.2
Net cash flows from/(utilised)
in financing activities (107.6) (200.0) 3,233.8
NET INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS (397.1) (1,925.6) 856.7
(Bank borrowings)/cash and
cash equivalents at the
beginning of the year 2,173.0 1,760.3 (107.8)
Effect of foreign exchange
rate changes (15.6) 57.5 87.9
CASH AND CASH EQUIVALENTS/
(BANK BORROWINGS) AT THE END
OF THE YEAR 1,760.3 (107.8) 836.8
DISCLAIMER
This presentation has been prepared and published by Vodacom Group
(Proprietary) Limited.
Vodacom Group (Proprietary) Limited is a private company and as such is not
required by the Companies Act 61 of 1973, as amended, to publish its
results.
Vodacom Group (Proprietary) Limited makes no guarantee, assurance,
representation and/or warranty as to the accuracy of the information
contained in this presentation and will not be held liable for any reliance
placed on the information contained in this presentation.
The information contained in this presentation is subject to change without
notice and may be incomplete or condensed. In addition, this presentation
may not contain all material information pertaining to Vodacom Group
(Proprietary) Limited and its subsidiaries.
Without in any way derogating from the generality of the foregoing, it
should be noted that:
Many of the statements included in this presentation are forward-looking
statements that involve risks and/or uncertainties and caution must be
exercised in placing any reliance on these statements. Moreover, Vodacom
Group (Proprietary) Limited will not necessarily update any of these
statements after the date of this presentation either to conform them to
actual results or to changes in its expectations.
Insofar as the shareholders of Vodacom Group (Proprietary) Limited are
listed and offer their shares publicly for sale on recognised stock
exchanges locally and/or internationally, potential investors in the shares
of Vodacom Group (Proprietary) Limited`s shareholders are cautioned not to
place undue reliance on this presentation.
Date: 09/06/2008 07:30:54 Supplied by www.sharenet.co.za
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